This debate has been going on for more than five years but is becoming sharper as there is a growing awareness of the different approach between councils and contractors. (see letsrecycle.com story)
Previously it was reasoned that the exemption for local authority waste services was reasonable because typically small one-off shops in the back streets of Birmingham, for example, would take up the local authority service so improving environmental standards in the area.
Others in the local authority area have argued that the impact of the local authority service will have little impact on ‘multi-million pound’ businesses.
However, the idea that councils provide trade waste income does take the whole concept one step further and also does directly pit them against contractors in a far more competitive environment.
Unfortunate
It is perhaps unfortunate that the case has come to court in a time of austerity which means that for some local authorities the arguments is more focused and the service delivery more urgent.
Contractors do have some difficulty in putting forward the private sector case for equal treatment in terms of VAT levies. They may naturally not want to upset their contractors.
However, the die now seems to be cast for further action and an appeal by the company raising the matter.
What might be opportune to do is for local authorities to revisit exactly what their aims in commercial services are and for the private sector to see how they can best work with local authorities. There are examples of business districts where organisations have worked well with contractors and strategies drawn up.
Direct competition and marketing may not be the way ahead. It is a time for cool heads and discussions. At the end of the day, it may not be VAT alone that influences contracts, it may well be more that service delivery is a factor and that prices for bins even on the same industrial estate or street can vary enormously.
Never mind running hares, is the Local Authority VAT exemption not a red herring? With the VAT registration trigger set at £83,000/year turnover then surely every SME serviced by a waste/recycling collection service will be VAT registered and will therefore claim back the VAT element of its commercial waste collection costs.
Therefore all services providers, VAT exempt or not, will be the same true cost to the SME.
I surmise the real issue is that the Local Authority is not adding a 15% profit margin to commercial trade waste collections and that an element of the vehicle, operational and admin costs are indirectly being cross subsidised by the statuary household collection service funded by the tax payer. I put it to you that perhaps it is this cross subsidy aspect that puts unfair competition into the marketplace, and not VAT.